How to get a Loan for debt restructuring?
March 1, 2020
The current low-interest-rate phase offers the ideal opportunity to get rid of expensive loans and thus give yourself more financial scope. Below you will learn how such a debt restructuring works, what advantages it offers and when it is worthwhile. boots5815.info for clarification
What does debt restructuring mean?
When a debt is rescheduled, a new loan is taken out in order to use this money to pay off one or more other loans.
For example, expensive loans from the past can be converted into cheaper loans or many individual loans can be combined into one. This will reduce your financial burden from the loan and give you more financial leeway.
When can rescheduling make sense?
Debt restructuring serves to improve one’s own financial situation. This can be particularly useful in the following cases:
- You want to pay off an expensive loan.
Did you take out a loan when market interest rates were far higher? With a current loan at a cheaper interest rate, you can reduce the cost of your loan and thus improve your own finances.
- You need an additional financial scope for further purchases.
If you want to take out a new loan for necessary purchases, for example, a car, new furniture or a vacation, it can make sense to use this new loan to replace old existing loans at the same time.
- You want to balance your overdraft facility.
Do you regularly use the overdraft facility in your checking account or may it not come out of it at all? The interest rate on an overdraft facility is significantly higher than that of a classic installment loan at almost all banks. By taking out a loan to reschedule the overdraft facility, you can save several hundred euros a year.
- You want to combine multiple loans and financing into one installment.
Often, consumers have multiple loans or goods financing to run at the same time. These individual repayments can be combined with a debt rescheduling loan in order to improve the clarity of your own finances.
A debt rescheduling always makes sense if the new loan can save costs or improve the clarity of your own finances.
What are the benefits of debt restructuring?
You can benefit from the following advantages in the course of debt restructuring:
- Your credit score can be improved.
The credit rating indicates your creditworthiness. It is not only decisive for whether you get a loan or financing, but also for which conditions are offered to you. The Schufa and other credit agencies rate it in the calculation of the credit rating quite positive if only data on one instead of several active loans are stored.
- You get an overview of your own financial situation.
Especially if you have several loans and financing to run, the overview of the monthly charges can quickly be lost. As part of a debt rescheduling process, you can combine these different installments into one repayment rate, which means you know the exact financial burden for all loans.
- You can give yourself more financial leeway.
As part of the debt restructuring, you can set the monthly rate for the new loan. This can be significantly lower than all previous credit installments combined, which gives you significantly more freedom in the financial structuring every month.
- You can get rid of your debts faster.
With the debt rescheduling, you will receive a loan agreement. In the course of this, it is also possible to agree on a shorter term than before, for example, if the situation of your earnings has improved significantly. In this way, you can pay off the newly taken out debt rescheduling loan faster and you are therefore debt-free more quickly. A shorter-term generally also leads to a decrease in the total amount of interest.
- You save cash.
Debt restructuring is particularly worthwhile if you use it to replace an older loan. While a few years ago the loan interest rate was 4 – 6 percent, installment loans are nowadays sometimes available for an effective annual interest rate of 1 – 3 percent. This is clear from the following example calculation:
For whom is debt restructuring worthwhile?
The debt rescheduling of one or more loans is always worthwhile when there are loan offers on the market at significantly more favorable terms. To find out whether debt restructuring is worthwhile for you personally, you should proceed as follows:
- Determine the outstanding debt of all of your current loans and financings.
- Calculate the total cost of your current loans.
- Use our loan comparison and enter the outstanding debt of all your loans as the loan amount.
- Compare the total costs of the offers from the loan comparison with those of your previous loans.
If the total cost of the new loan is lower, debt rescheduling is definitely worthwhile. It is important that you pay attention to the fine print of your existing loans to see whether a prepayment penalty is due to the bank for early repayment.
Conclusion on the loan for a debt restructuring
With a debt rescheduling loan, you can save costs and expand your monthly financial scope. Debt rescheduling is particularly worthwhile for loans that have been in existence for a long time since interest rates on installment loans have dropped significantly in recent years.